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The government of India signed a Double Taxation Avoidance Agreement (“DTAA”) in accordance with the provision agreed to in the Convention for Avoidance of Double Taxation with Spain on 8 February, 1993. A protocol, amending the DTAA was thereafter signed on 26 October, 2012, which entered into force from 29 December, 2014. However, a notification under the Income-tax Act, 1961 was not issued for nearly five years in India to give effect to the protocol and finally on 27 August, 2019 a notification was released by the Ministry of Finance (Department of Revenue) to bring the DTAA into force.


The DTAA is applicable to persons who are residents of one or both of the states and covers the following taxes in the contracting states:

a. In Spain:

  • the income tax on individuals;
  • the corporation tax;
  • the income tax on nonresidents; and
  • the capital tax.

b. In India:

  • the income-tax including any surcharge thereon;
  • the surtax; and
  • the wealth-tax.

Key highlights

a. The competent authorities of the contracting states shall exchange such information as is foreseeably relevant in relation to the domestic tax laws for carrying out the provisions of the DTAA.

b. Such information is to be treated as secret and be disclosed only to states upon a formal request.

c. The amending protocol entered into force two months after receipt of the later of the notifications and had the following effects:

  • in the case of withholding taxes, in respect of amounts paid on or after the date, the amending protocol enters into force;
  • in the case of other taxes, in respect of taxes levied for taxable years beginning on or after the date the amending protocol enters into force; and
  • in all other cases, on or after the date on which the amending protocol enters into force.

d. In-line with the international standards and in furtherance of the provisions agreed to in Organisation for Economic Co-operation and Development, the contracting states shall lend assistance to each other in the collection of ‘revenue claim’.

e. Following are the applicable withholding rates:

  • Dividends – 15%;
  • Interest- 15%;
  • Royalty- 10% or 20%, as may be applicable.

f. The profits of an enterprise of a contracting state, shall be taxable only in that state unless the enterprise carries on business in the other state through a permanent establishment situated therein.


One of the key amendments brought about by the protocol signed after the DTAA was the introduction of Limitation of Benefits clause in the India- Spain DTAA. The tax treaty also provides for application of the domestic General Anti-Avoidance Rule (GAAR) provisions to instances of tax abuse including treaty abuse in the contracting states. These provisions, however, are not similar to the principal purpose test provisions of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (“MLI”) to which both India and Spain are signatories. Further, provisions of the MLI came into effect in India from 1 April 2020. However, the protocol restricts the treaty benefits to beneficial owners of income to some extent.

To know more about DTAA relations between India and Spain, please download our Guide.